MILAN – The worldwide appetite for luxury goods continues to be healthy.

Bain & Company’s Luxury Goods Worldwide Market Study – Spring 2023, presented on Friday with Altagamma in Milan, shows the non-public luxury goods market is projected to grow between 5 and 12 percent in 2023, or between 360 billion and 380 billion euros,  following a record 12 months in 2022, despite geopolitical tensions and macroeconomic uncertainty.

Last 12 months the sector reached a market value of 345 million euros, and by 2030 it’s more likely to reach between 530 billion and 570 billion euros. That is around 2.5 times its size in 2020. The primary quarter of 2023 continued to indicate good momentum, leading to growth of between 9 and 11 percent compared with 2022.

The Bain-Altagamma evaluation sets out two scenarios: A positive one driven by China’s recovery and sustained growth from Europe and the Americas, with growth projected to be between 9 and 12 percent on 2022. A sensible scenario shows overall growth more severely impacted by a slowdown in mature markets, and a slower recovery in China, resulting in growth of between 5 and eight percent on 2022.

“The posh industry is experiencing a latest phase after its post-pandemic growth, with renewed drivers of resilience establishing winners and losers,” said Claudia D’Arpizio, partner at Bain & Company, leader of Bain’s Global Luxury Goods and Fashion practice, and lead writer of the study. “Brands who wish to succeed have to focus holistically on consumers; balance their exposure across geographies; offer a high value proposition with elevated entry clienteling and experientiality at scale, and push on icons, timeless, and statement pieces.”

The continued growth in the primary three months of the 12 months was attributed to the gradual decrease of hyperinflation, recovering confidence of local consumers in Europe, the lifting of China’s COVID-19 restrictions before Chinese Latest Yr, and the positive momentum in Japan and Southeast Asia, bolstered by intraregional tourism.

Federca Levato, partner at Bain & Company and leader of the firm’s EMEA Luxury Goods and Fashion practice, co-author of the  report, said in an interview that luxury consumers are actually valuing uniqueness over status, beyond aspirational items, in “an elevation of the market toward uber luxury, less purchases but higher.” Stores have gotten “entertainment platforms, less transactional, offering good times,” and types are increasingly moving into hospitality, opening VIP lounges and clubs.

Nevertheless, the image is nuanced across countries, said Levato, as Europe is on the rise due to strong tourist flows, while the U.S. is slowing down as a result of consumer caution in light of a possible recession and the top of COVID-19 relief funding.

Top U.S. luxury consumers are holding up, focusing their purchases on statement pieces across categories in addition to latest formal and occasion wear, yet partially shifting their spending abroad as price differentials widen and aspirational customers are spending less. The study also sees a rebalancing of the posh map, with Latest York and California coming back while holiday destinations, equivalent to Hawaii and Las Vegas, are recovering yet still behind their 2019 peaks.

Levato said an issue mark stays concerning the evolution of the U.S. market throughout the remainder of the 12 months, as “an enormous improvement isn’t expected ahead,” while shops are “changing skin, struggling as the client base is changing and so they are targeting the brand new generations.”

Europe could have to face a slowdown within the arrival of U.S. and Middle Eastern tourists within the second half. Within the last months, the primary Chinese tourists traveled to Europe, and a solid return is anticipated later within the 12 months.  

Mainland China saw growth in the primary quarter and is anticipated to rise again this 12 months, with some brands back to 2021 levels, continued Levato. Within the meantime, the Asian market is experiencing a reshuffling:  Hong Kong and Macau posted a pointy acceleration as primary destinations for Chinese tourism for the reason that country reopened, with additional tailwinds from government policies, and the study pointed to a market value there in 2022 of about 5 billion euros.

Southeast Asia continued to grow strongly, supported by Russian tourists’ spending, the primary arrivals of Chinese consumers, and a powerful appetite for jewelry and watches, the region totaling a market value of around 12 billion euros.

South Korea, then again, is slowing down with a rebalancing of locals spending on purchases abroad and travel retail accelerating, as a result of inflows from Southeast Asia and despite the limited Chinese arrivals to this point. The world had a market value of around 21 billion euros in 2022.

Japan, with a market value of around 24 billion euros last 12 months, is the rising star as local customers are maintaining their spending and growth is coming from inbound tourists, including the primary Chinese arrivals, which might be hungry for best-selling accessories.

Top performing categories include watches and jewellery, with uber-luxe pieces driving growth, and bags increasingly perceived as priceless assets. Shoes are booming in Asia, while slowing down within the Western world, transcending beyond sneakers. In beauty, the study shows growth in fragrances, fueled by area of interest offerings and the recovery of duty-free, while makeup and skincare maintain positive trajectories.

Travel retail is finally recovering due to dynamism in Southeast Asia and Japan. The monobrand category continued its solid growth from 2022.

Key challenges for the industry within the midterm are linked to ESG regulatory pressures in addition to the impact of generative AI and latest technologies on all steps of the worth chain.